Smuggling, burdening the economy

By Ajith Perera
As the nation awaits a new budget with the hope of finding relief amid heavy economic pressures, it is now imperative authorities focus on wider aspects of governance to prevent further outflow of valuable revenue.

With governments and authorities focused on the multiple crises at hand, there has been a rise in smuggling. Cigarettes are the most popular contraband item in Sri Lanka due to the promise of ludicrous profits stemming from the high price of cigarettes. 

Over the past few months, several new brands have pervaded the market and are found in the city and along its tourism belt. In April this year, authorities discovered a container with 4 million cigarettes worth over Rs. 280 million, amply demonstrating the elusiveness of smugglers targeting Sri Lanka and its tobacco trade. 

Had these illegal cigarettes reached the market, the government was projected to have lost over Rs. 200 million in revenue. In 2021 alone, the national economy was dealt a blow of a Rs. 27 billion revenue loss while Rs. 133 billion revenue loss has impacted the national economy over the period of 2016 – 2021.

Having the highest price for legal cigarettes in the world at purchasing power parity, Sri Lanka is positioned as a goldmine for smugglers who chance profits over risks. 

Accordingly, this only proves the vital need to revisit our system of tax, justice, and enforcement as it would be futile to place emphasis on high price if we continue to make room for cheap illicits to infiltrate the market. Whilst enforcement is underway, the abundant availability of illicit products points to a still prevalent need to plug holes within our system. 

While other products that face import restrictions including confectionary, food products and cosmetics have also emerged into the marketplace, the biggest revenue lossto the government from smuggling activities continues to be from tobacco products. Accordingly, excise and other officials engaged in detections of counterfeit items must be further empowered with appropriate laws and incentives for efforts taken to curb the smuggling of goods.

It is evident that smuggling has continued to burden Sri Lanka over the years. However, its recent exacerbation has presented increasing challenges to our aspirations for revenue and security. A loss of Rs. 27 billion due to illicits from a single sector alone must instigate considerable deliberation on means to stem the rot. We can no longer afford to turn a blind eye on channels of revenue.